Tax filing MFS

[SimplyNew]

Hi! My husband and I both do full time gig work. He makes more as I also homeschool. I started a small business but haven't made anything and have to file losses. However my husband wants to change from independent contractor to llc. So we will both have a single member llc. We also want to have me as an employee for him. How would that work with filing?

Basically, 2 separate single-member llc, wife as a paid employee of husband but wife has a single member llc too. 

[Vanessa A]

As a single member LLC nothing will change tax wise.  You will still both file Schedule C to report your income and losses.

If he hires you as an employee in his LLC, then he will need to pay employer taxes for you(7.65% of your income for Medicare and Social Security Taxes) on any income you earn from his business and he will need to withhold your share of taxes (the other 7.65% for Medicare and Social Security as well as Federal, state and local taxes) from your pay and submit it monthly or quarterly just as if he was employing a stranger.  The only tax he will not need to pay since you are his spouse is the FUTA taxes. 

In this situation, he would need to get an EIN to pay the taxes on you as well.  You would both still file a Schedule C, one for your business, one for his and then he would issue you a W-2 that you would report as ordinary income.  You will both need to still file your quarterly SE Taxes for your own businesses in addition to him paying payroll taxes.

Is there a reason you are wanting to be added as an employee instead of being a partner in his business? Before making the decision on how to form your business, it would be highly suggestible to talk to a local expert that can look at the details of your specific situation and help you decide which is best for you. 

Married Couples in Business 

[Opus 17]

There's no reason you can't file jointly, and jointly will usually have lower taxes.  

You would have a schedule C for spouse A's LLC, a schedule C from spouse B's LLC, a W-2 for spouse B as an employee of spouse A's LLC, and any other income, deductions, dependents and credits.

[VolvoGirl]

Are you filing Separately?   It is usually better to file Joint. Joint has the lowest tax rates and the highest Standard Deduction. And if you are in a Community Property state MFS gets tricky to figure out. See,
https://ttlc.intuit.com/community/married/help/married-filing-separately-in-community-property-state...

Here's some things to consider about filing separately……

In the first place you each have to file a separate return, so that's two returns. And if you are using the Online version that means using 2 accounts and paying the fees twice.

Many people think they come out better when filing Married Filing Separate but they are probably doing it wrong. If one person itemizes deductions then the other one must itemize too, even if it's less than the standard deduction, even if it is ZERO!

And there are several credits you can't take when filing separately, like the

EITC Earned Income Tax Credit

Child Care Credit

Educational Deductions and Credits

And contributions to IRA and ROTH IRA are limited when you file MFS.

See …….
https://ttlc.intuit.com/community/married/help/is-it-better-for-a-married-couple-to-file-jointly-or-...

[Mike9241]

@SimplyNew I agree with @Vanessa A  that best, would be to sit down with a pro. The wages he pays you must be for actual work performed and be reasonable.  Your state may require his LLC to carry workers' compensation on you because you're an employee. His deduction for QBI, I99A will likely be reduced by 20% of your salary and other payroll costs.  so trying to even out taxable income between the two of you could be more expensive than filing jointly. .